AMITAVA LALA,J. - (1.) THIS appeal has been preferred by the assessee challenging the judgment and order dated 13.7.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench "I" Delhi taking mainly two pleas i.e. (i) that the order is an ex-parte order, and (ii) the order requires reconsideration in view of the judgment of a Division Bench of the Bombay High Court reported in (2000) 163 CTR (Bom) 594, Commissioner of Income Tax v. Punit Commercial Ltd.
(2.) SO far as first point is concerned, appellant's contention is that from the recital of the judgment it can be seen that notice was served in the wrong address and as such the appellant failed to attend the proceeding when the order impugned was passed ex-parte only on the ratio of the judgment passed by the Delhi High Court reported in 289 ITR 475 (Del.), CIT v. Sriram Honda Power Equipment, as referred by the tribunal in paragraphs 7 and 8 of the impugned judgment. Paragraph 7 and 8 are as follows: "7. The Revenue has preferred the present appeals against the aforesaid orders of the CIT(A). The issue raised in the present appeals by the Revenue has been settled by the decision of the Hon'ble Delhi High Court in the case of CIT v. Sriram Honda Power Equipment, 289 ITR 475 (Del). With regard to the interest income earned on deploying surplus funds the Hon'ble Court has held that the same should be assessed as income from other sources. The following are the observations of the Court in this regard. Where surplus funds are parked with the bank and interest is earned thereon it can only be categorized as income from other sources. This receipt merits separate treatment under Section 56 of the Act which is outside the ring of profit and gains from business and profession. It goes entirely out of the reckoning for the purpose of Section 80-HHC. To give effect to this position, the AO while computing profits of the export business will have to remove from the debit side of the profit and loss a/c the corresponding interest expenditure that has been "laid out" to earn such income from other sources. Otherwise this will depress the profits by an amount which is out of the reckoning of Section 80-HHC, a consequence not intended to be brought about. The other category is where the exporter is required to mandatorily keep monies in fixed deposit in order to avail of credit facility for the export business. Interest earned on fixed deposits for the purposes of availing of credit facilities from the bank, does not have an immediate nexus with the export business and therefore has to necessarily be treated as income from other sources and not business income." 8. With regard to the principle of netting the Court has held as follows: "Where, as a result bf the computation of profits, and gains of business and profession, the A.O. treats the interest receipt as business and profession, the A.O. treats the interest receipt as business income, then deduction should be permissible, in terms of Explanation (baa) of the net interest i.e. the gross interest less the expenditure incurred for the purposes of earning such interest. The nexus between obtaining the loan and paying interest thereon (laying out the expenditure by way of interest) for the purpose of earning the interest on the fixed deposit, to drawn an analogy from Section 37, will require to be shown by the assessee for application of the netting principle." So far as non-service of notice is concerned, it has been pointed out by Mr. Shubham Agrawal, learned Counsel appearing for the appellant, that the address of the assessee is shown as A-9, Sector-30 Noida, whereas actual address is C-9, Sector-30, Noida. It has been further said that the order sheet shows service in Ghaziabad but nowhere it has been recorded that the service has been affected. Having come to know such order from the proceeding of another appeal in connection with DEPB facility, which is totally unconnected with the present issue, the assessee is compelled to prefer this appeal from the order impugned when passed on merit following the provision laid down under Section 260-A of the Income Tax Act.
(3.) ON the other hand, Sri Dhananjay Awasthi, learned Counsel appearing for the revenue, has contended before this Court that if this Court goes by the notice issued by the office of the Commissioner Income Tax (A), Ghaziabad in other appeal it will be seen that the address has been shown as A-9, Sector-30, Noida. Inspite of the same, the assessee appeared and contested the appeal before the appellate authority. Therefore, the ground of non-service of notice upon the assessee is fictitious in nature. Moreover, the order impugned has been passed by the tribunal following the judgment of Sriram Honda Power Equipment (supra) with regard to interest income earned on doubly surplus fund by the assessee as income from other sources. If we go by the order impugned before the tribunal, as pointed out by Mr. Agrawal, we see as follows: "I am inclined to agree with the submissions of the appellant that the interest income earned on bank deposits taken on the facts and circumstances of the case is incidental to the business of the appellant, which is 100 percent export. I had taken a view in the case of M/s Vrindavan Overseas, a sister concern of the appellant, in their appeal for Assessment Years 93-94, 94-95, 95-96, 97-98 and 2000-01 that interest income on bank FDRs taken and furnished to bank as security for availing Packing Credit and Other limits in, its export business would be business income. I find that on the facts of the case in the present appeal, the FDR's taken by the appellant out of its accumulated export profits were used by way of security for availing credit limits to the tune of Rs. Four Crores, as certified by the Bank. Thus, the nexus between these FDRs and export of business of the appellant is not absent in view of the bank's certificate. Therefore, interest earned thereon is from utilization of business funds and would thus bear the same nature and character as of business receipts. I, therefore, hold that interest income is assessable as business income on the facts and circumstances of the case." ;